Effective Practices : Finances


Tuition Protection Plans
Finances Section 6

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1. Does your school have a tuition protection plan? If so, is it a self insured plan, or do you use an outside service?
2. How did your school make the decision to implement a tuition protection plan? If your school does not have such a plan, why not?
3. Outline the general features of the plan and how it works. For example, does it provide full coverage in cases of illness, withdrawal and expulsion? Or are there limitations on the coverage provided by the plan?
4. Is participation in the tuition protection plan mandatory? Or may parents elect it freely as a benefit?
5. Describe the key elements of your school’s philosophy in relation to tuition protection plans.
6. What about your school’s tuition protection plan is particularly effective?
7. If there were something you could change in relation to your school’s tuition protection plan, what would it be and why?

FIN 6-1

Does your school have a tuition protection plan? If so, is it a self insured plan, or do you use an outside service?
The majority of Waldorf schools surveyed have a tuition protection plan in place. All of the schools with a tuition protection plan began the program by using an outside service to provide coverage for parents. The majority of these schools no longer use an outside service provider; they now have a self insured plan in place.

When schools first begin offering a tuition protection plan there is often a bit of uncertainty as to how the plan will be structured, the percentage of tuition dollars that should be charged as a premium, and the amount of coverage the plan will provide in various situations. For this reason there is a fair amount of comfort in signing up with an outside vendor that offers a turn key service. However, after a few years with the outside vendor it becomes clear to schools that the rate parents are being charged is enough to cover the school’s withdrawal experience plus an additional amount to cover the administrative expenses of the vendor and to provide the vendor with a profit. Schools then make a decision to offer the plan to parents directly, and are able to either reduce the rate parents are being charged or to put the additional funds generated to another use in the school.

FIN 6-2

How did your school make the decision to implement a tuition protection plan? If your school does not have such a plan, why not?
Schools Without a Tuition Protection Plan - The schools in the survey without a tuition protection plan are all younger schools that are not yet full members of the Association. Often times the schools that do not offer a tuition protection plan do not charge parents tuition if a student withdraws from the school mid-year. If the school does not collect a full year’s tuition in cases where a family withdraws early then the fees charged for tuition protection can seem especially exorbitant for parents and will return little real value to the school. It is not a surprise that these schools often report that they have a relatively low incidence of mid-year withdrawals. These schools are also often under-enrolled with openings in many of the classes. These openings make it difficult for a school to argue that they could have enjoyed a full year’s tuition income from another family and that the school’s commitment to offer a space to a family that subsequently withdraws mid-year has cost them real tuition dollars.

In other cases these schools have made the decision to begin requiring parents to commit to a full year’s tuition, but have been implementing so many other necessary changes that the addition of a tuition insurance plan has not yet been possible. The following description of one school’s decision making process is illustrative of this stage of growth as a young school moves toward maturity.

“The school considered adding a tuition protection plan two years ago. The school looked at tuition protection plans offered by outside companies and made the determination that the cost of these programs was too high relative to what they returned. Consideration was given to offering a self-funded plan, but there was a strong sense among the faculty that the school needed to be sensitive to the overall amount of increase that parents were being charged, and at that time the school had decided to raise tuition by 5%. The school had also made the decision to convert to an outside tuition management firm, FACTS, for collection of tuition, and felt that enough changes were being made without also adding a tuition protection plan.

“The question of adding a tuition protection plan will probably be revisited this year. The school has made other changes such as assessing a late fee for delayed re-enrollment that reflect the positive way in which it views the value of the education it offers, and an expectation that parents meet this value with a similar level of commitment. The addition of a tuition protection plan may be another step in this process as the school matures.”

Schools with a Tuition Protection Plan - In some cases schools made the decision to add a tuition protection plan at the point where they began expecting parents to make a full year financial commitment to the school, and that withdrawing mid-year did not relieve parents of this commitment. Typically these schools have fairly full classes, and a mid-year withdrawal translates into a real loss of income as the withdrawing student’s chair could probably have been filled at the beginning of the year by a student who could make a full year commitment. In addition these schools recognize that few of their expenses for the year are variable and that a drop in income from unexpected withdrawals will have a negative impact on both cash flow and profit (or to be more technically correct, on the school’s excess of income over expenses). In these cases the addition of the tuition protection plan made tuition budgeting more predictable and allowed schools to make their expense plans without having to reserve dollars “just in case” withdrawals occur midyear.

In other cases schools report that they implemented a tuition protection plan during a period when they were having considerable collection difficulties, especially in situations where a family withdrew a student midyear. These schools reported that once they had a tuition protection plan in place that families which withdrew mid-year had paid more than enough on their tuition accounts to cover the portion of the remaining tuition not covered by the plan. As a result the collection pressure has eased and families are able to part ways with the school mid-year without financial stress for either the parent or the school.

FIN 6-3

Outline the general features of the plan and how it works. For example, does it provide full coverage in cases of illness, withdrawal and expulsion? Or are there limitations on the coverage provided by the plan?
A typical tuition protection plan provides various levels of coverage depending on the reasons for the student’s departure from the school:

  • In cases of illness the tuition protection plan provides full coverage after a student has missed 30 continuous days of school. Schools with self insured plans report that in some rare cases coverage has also been extended when a seriously ill parent has not been able to work due to an extended illness.
  • When students leave midyear the coverage provided by these plans varies from 50 to 75%. Some schools report that coverage for midyear withdrawals is 50%, regardless of whether the student leaves voluntarily or is expelled. Other schools report that their plans cover 75% of the remaining tuition for the year in cases of expulsion, and in cases where a family withdraws a student voluntarily that the coverage is 60% of the remaining tuition. The percentage of tuition that a plan covers is directly related to the premium charged for the program. The higher the coverage percentage offered the higher the necessary premium rate must be to generate the necessary reserve dollars.

(See: Sample Tuition Refund Policy)

FIN 6-4

Is participation in the tuition protection plan mandatory? Or may parents elect it freely as a benefit?
All schools that offer tuition protections plans make participation in the plan mandatory for parents electing to pay tuition in either semi-annual or monthly increments.

Additionally, some schools require parents who pay in full up front to participate in the plan too. Another variation on this approach is found in schools that require parents who pay in full to participate in the plan during their child’s first year at the school, and then leave participation as an option in subsequent years of attendance.

FIN 6-5

Describe the key elements of your school’s philosophy in relation to tuition protection plans.
The school should never sell itself short. The school has made an important commitment to its teachers and to providing a course of study for many children; parents need to make an equal commitment by committing to a full year’s tuition.

A tuition protection plan provides teachers with additional freedom to make choices that are best for the child and the class. If a parent is going to be adversely affected financially by a decision to remove a student from the school, it can be hard for a teacher to make the right choice. Tuition protection removes much of the financial burden, helping to make the right course for the student and the class more apparent.

New parents who have never enrolled in a private school sometimes feel that the tuition protection requirement is a sign that they are not trusted. However, a short conversation is easily able to reassure them on this point, and the plan is reasonably well received.

If a school is looking to have someone else underwrite a tuition protection plan the school needs to recognize that it or its parents will be paying an additional premium for someone to offer the service.

If a school self insures, then it must reflect the charges against the plan as a normal expense in the financial statements.

The terms and conditions must be documented, and parents must be advised of those terms and of the fact that they are protected if a withdrawal occurs.

Having a tuition protection plan in place allows a school to feel comfortable about collecting the remaining tuition balance in cases of withdrawal.

The decision about whether to have a tuition protection plan of any sort (outside or self-insured) is a direct product of a school’s thinking about its financial relationship with the parents and how the various tuition related policies reflect that philosophy. For our school the thinking is that a decision to enroll a student is a mutual one in which a school agrees to offer educational services and a parent makes an agreement to support the school financially in its work to offer that education. A tuition protection plan allows a school to continue offering educational services without compromise in a case where a student withdraws, and the parent is able to meet his financial commitment without an undue burden. The existence of a tuition protection plan also supports fairness in the overall relationship between the school and the parent body.

It is important that a school’s approach to tuition protection and a school’s payment schedule be aligned. A school needs to ensure that if an account is current that the school will not be left needing to collect additional unpaid tuition from a family once the tuition refund credit is applied.

We want to be able to assist parents in living up to their obligations. The tuition assistance plan helps them to do that in a way that serves both the parents and the school.

The tuition protection plan means that the school comes much closer to collecting 100% of the tuition it billed at the beginning of the year.

FIN 6-6

What about your school’s tuition protection plan is particularly effective?
In some cases of student withdrawal there is no fault on either side (e.g. employer transfer). In other cases the school is unable to provide the educational support that a child requires. Having a tuition protection plan helps make these difficult transitional situations easier on both parties.

Self insurance is the most economical way to provide for tuition protection.

Although short term spikes in withdrawals can still affect the school’s bottom line, our experience over time shows clearly that self insurance is the most economic approach and that these short term spikes are just a normal part of any school’s experience.

The school has periodically reviewed the plan in all aspects to confirm that it is still the most effective method to deal with early withdrawals. No changes have been made as a result of these reviews.

The existence of this plan has allowed the school to avoid substantial uncollected debt.

Participation on the plan is mandatory for all parents that elect to pay using the semi-annual plan or the monthly payment plan. It is also mandatory for all first year parents in the pre-school.

One of the biggest benefits is the freedom it affords teachers and parents to make the right decision regarding a child’s continued enrollment in the school. When the financial implications of a decision are minimized the proper course of action is often more apparent.

FIN 6-7

If there were something you could change in relation to your school’s tuition protection plan, what would it be and why?
The schools that have a tuition protection plan are very satisfied with their programs and feel strongly that this is an important tool that benefits both parents and the school.

Some schools noted that they would be considering making the shift to a self-insured plan. One school that had made this shift a few years ago noted:

“Our school should have gone to self insurance earlier. In the past we used a well established, respected firm, and the program with this outside vendor ran very smoothly. However a review of the costs associated with the program made it clear that self insurance was the way to go. Premiums were kept at a level similar to those charged by the outside service, and the school has since produced a small excess each year that is being placed into a reserve account. Our aim is to build a two year premium reserve, and after three years the school has reached 60% of that goal. At such time as the two year premium reserve goal has been met a decision will be made about whether to reduce fees, to increase the level of protection above 50%, or to use the additional funding to support the school program.”


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